GBP to USD Forecasts: Bulls Eye $1.26 on UK GDP and US Debt Ceiling
It is a busy day ahead for the GBP/USD. Following the hawkish BoE interest rate hike, the market focus will shift to the UK economy.
This morning, GDP numbers will be in focus. Economists forecast the UK economy to grow by 0.1% in Q1 following 0.1% growth in Q4. However, economists expect the UK to see slower growth year-over-year and for the economy to stall in March.
While the headline numbers will need to impress, manufacturing production and trade data will also need consideration. Economists forecast the more influential manufacturing production to fall by 0.1% in March after stalling in February.
However, investors should also monitor Bank of England chatter, with the UK economy in the spotlight. The Bank of England Chief Economist Huw Pill is on the calendar to speak today. The markets should also monitor BoE commentary with the media.
The BoE delivered a hawkish policy move on Thursday. Significantly, the BoE had a more optimistic outlook toward the UK economy, noting the economy showed remarkable resilience. Better-than-expected GDP numbers would give the BoE Chief Economist a platform to discuss inflation and rate hikes.
GBP to USD Price Action
This morning, the GBP/USD was up 0.06% to $1.25174. A mixed start to the day saw the GBP to USD fall to an early low of $1.25068 before rising to a high of $1.25189.
Resistance & Support Levels
|R1 – $||1.2602||S1 – $||1.2457|
|R2 – $||1.2693||S2 – $||1.2405|
|R3 – $||1.2838||S3 – $||1.2260|
The Pound needs to move through the $1.2549 pivot to target the First Major Resistance Level (R1) at $1.2602. A return to $1.2550 would signal an extended breakout session. However, the Pound would need the UK GDP numbers and US debt ceiling talks to support a breakout session.
In the event of an extended rally, the GBP/USD would likely test resistance at the Thursday high of $1.26408 but fall short of the Second Major Resistance Level (R3) at $1.2693. The Third Major Resistance Level sits at $1.2838.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2457 in play. However, barring another risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.24. The Second Major Support Level (S2) at $1.2405 should limit the downside. The Third Major Support Level (S3) sits at $1.2260.
Looking at the EMAs and the 4-hourly chart, the EMAs send more bearish signals. The GBP/USD sits below the 100-day EMA, currently at $1.25319. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.
A move through the 100-day EMA ($1.25317) would support a breakout from the 50-day EMA ($1.25714) to target R1 ($1.2602) and the Thursday high of $1.26408. However, failure to move through the 100-day EMA ($1.25317) would leave S1 ($1.2457) and the 200-day EMA ($1.24554) in view. A move through the 50-day EMA would send a bullish signal.
The US Session
Looking ahead to the US session, it is a relatively busy day on the US economic calendar. Michigan Consumer Sentiment and Consumer Expectation numbers will be in focus.
Following the Fed’s decision to hike interest rates by 25 basis points, consumer sentiment toward the economic outlook, inflation, and the labor market will likely be focal points.
While the Michigan numbers will influence, we expect FOMC member commentary to draw interest following the latest round of inflation numbers. FOMC member Bowman is on the calendar to speak later today.
Beyond the economic calendar, the banking sector and the US debt ceiling will also need monitoring.